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Rural Broadband – Time for “Business Unusual”

Rural Broadband – Time for “Business Unusual”

“Stupidity is doing the same thing over and over again and expecting a different result.”

–Albert Einstein

Einstein’s often-quoted observation is a good reminder for how the industry should not address “rural broadband.” The last five years have seen a new wave of activities that work to “bridge the digital divide” and enable rural broadband. Yet we see the same mistakes from the past happening in many countries, even countries that should be setting the example for the rest of the world. For example, accusations are reported in the UK media that the UK government favours the “incumbent” as a means to expand broadband coverage, which has not delivered the desired impact.

This policy aspiration vs. policy impact is a recurring theme. How different is our current conversation today about rural broadband to the ones we had about bridging the digital divide? How are the conversations today different from the dialogue before and after the 1982 Maitland Commission Report?

The key difference in today’s conversation is that we have moved from discussing “why” we should bridge the divide to discussing “how” we should bridge the divide. The question however remains about “what” do we use to bridge the divide? What approach is the most appropriate and have the biggest impact? Thesewill be some of the opening questions of the panel debate on “Delivering Broadband to Rural Areas” at ITU Telecom World 2013.

Meanwhile, we need to ask “what is rural broadband”? In many emerging markets 256kbps is already broadband, while in many developed countries, broadband is expected to be anywhere between 10Mbps to 1Gbps. Does rural include sub-urban areas or only remote areas which are usually scarcely populated? The definition does impact the debate about regulations and technologies. Are we talking about bringing fibre or LTE to rural homes, should the government fund this? If so, how should it be funded, and last but not least should it be best addressed in a technology and business model agnostic way?

What is key to keep in mind is that in rural areas, especially in emerging markets, the cost of acquisition and maintenance of a rural customer is very high, leaving very low or little profit margins. Universal service funds therefore have not been able to solve the universal service problem. It is time for a new conversation. It is time for BUSINESS UNUSUAL.

For example, it is often easier and cheaper for grassroots entrepreneurs to bring rural broadband to rural communities and there are many success stories around the world to showcase this. However, regulators may need to intervene to encourage telcos to enter into business arrangements with small rural providers, to provide policy exemptions enabling other smaller players to become “telecom operators” in rural areas and even give preference for any universal service funding to smaller operators, wherever possible. It is actually a win-win for the telecom operator as they can now reach rural customers but deal with the small provider as one customer and hence get a return without the headache of managing each rural customer. This is not unlike a household “offering” bandwidth it buys to the people in the house and buying more bandwidth if there are more people or bandwidth demands to be serviced.

Another aspect of an unusual business model involves tools to bridge the energy divide and the digital divide jointly. In many rural areas, you cannot bridge the digital divide without bridging the energy divide. Approximately 1.4 billion people live without access to electricity and about 1.6 billion without access to telecommunications, and so in many ways the link is very obvious. For telcos, the energy line item for rural telecom cost ranges anywhere from 35% to 75% of OPEX making rural broadband even more unprofitable. The use of energy efficient-technologies and the use of alternative sources of energy such as solar, wind, battery backup and other hybrid solutions are now proving to make better business sense. Yet many telcos and tower companies don’t feel it is their core competency to manage power. In India and Indonesia, there is a rising number of energy services companies offering rural electricity, where the telecom operator, tower company or grassroots telecom entrepreneur is the anchor tenant. More countries should consider policies to encourage this new business model, which will support the spread of broadband as well as renewable energy. In fact, many investors today believe that telecom can be considered to be the “killer app” for renewable energy (telecom needs reliable 24/7 energy and the energy provider gets a consistent anchor tenant).

Ultimately, the key to rural broadband involves innovative technologies, innovative regulations/policies and innovative financing/business models. It is indeed time for BUSINESS UNUSUAL if we are ever to truly bridge the broadband digital divide, let alone just the narrowband digital divide. Policy makers should recognize that they cannot bridge the digital divide without also addressing the energy divide when it comes to rural broadband in emerging markets. Hence policies and funding that favour energy efficient-technologies and/or solutions that run on green energy, and also grassroots entrepreneurs to thrive through win-win relationships with telcos, will help effectively to bring rural broadband for the prosperity of all.

Laina Greene, Executive Director, IBS Tower